Background
On 2 June 2025, the European Commission (Commission) imposed fines totalling €329 million on Delivery Hero and its subsidiary Glovo for engaging in anti-competitive conduct between 2018 and 2022 (press release available in German and English). Read our recent alert for a detailed review of the Commission’s decision and see our article, “Antitrust scrutiny in HR practices: Data centres are no exception” for additional information.
In summary, the Commission found that the companies had entered into a cartel by agreeing not to poach each other’s employees, exchanging commercially sensitive information, and dividing markets within the European Economic Area (EEA).
This marks the first instance where the Commission has penalised companies both for no-poach agreements and for leveraging a minority stake to influence a competitor’s actions. Delivery Hero was fined €223 million, while Glovo received a €106 million fine. Both companies admitted to their activities and settled the case with the Commission, resulting in a 10% reduction in fines.
The investigation originated from concerns that Delivery Hero and Glovo, prior to Delivery Hero’s full acquisition of Glovo in July 2022, had engaged in practices that restricted competition. Starting in July 2018, Delivery Hero held a minority stake in Glovo. The Commission’s investigation revealed that the companies had agreed not to hire each other’s employees, shared sensitive business information, and coordinated market strategies. These actions were considered one single and continued infringement under Article 101 (1) of the Treaty on the Functioning of the European Union (TFEU). In particular, the no-poach agreement was found to have limited employment opportunities and worker mobility within the EEA.
Navigating no-poach agreements
Previous legal assessment and competition concerns
The Commission’s decision underscores the importance of ensuring that employment-related agreements comply with EU competition law. No-poach agreements, where companies agree not to approach or hire each other’s employees, can be considered anti-competitive, especially when they are not ancillary to legitimate collaborations.
The decision also reflects an enforcement trend in which employment-related arrangements between undertakings competing in the market for talent and specialised employees are in the spotlight of EU competition law scrutiny. In its May 2024 Competition Policy Brief, the Commission identified wage-fixing and no-poach agreements as “restrictions by object”, which are inherently anti-competitive within the meaning of Article 101 (1) TFEU. These agreements were deemed per se harmful to competition, obviating the need for a detailed analysis of their effects.
The principal concerns identified by the Commission relate to the suppression of wage competition, the artificial restriction of employee mobility and the stifling of labour market dynamism. According to the Commission, these practices undermine one of the fundamental pillars of a well-functioning internal market – namely, a competitive and open labour market in which undertakings must compete for talent.
In its recent decision against Delivery Hero and Glovo, the Commission emphasised the obligation to preserve a fair labour market environment – one in which opportunities for workers to advance their careers are not restricted by covert or collusive arrangements between employers. The notion of fair competition, in this context, extends beyond consumer-facing markets and encompasses the competition for skilled personnel.
In November 2024, the Commission carried out unannounced inspections in the data centre construction sector, focusing on suspected no-poach agreements. It investigated possible agreements that could restrict competition under Article 101 TFEU. The outcome of this investigation is still pending.
Narrow exceptions
No-poach and wage-fixing agreements are generally regarded as restrictions of competition “by object” on the relevant hiring market under Article 101 (1) TFEU, particularly where the employers operate in the same markets and compete over the same personnel. However, an infringement can still occur if two parties, despite pursuing different business objectives, compete over the same talent in the labour market.
The Commission holds that only in a few circumstances will no-poach agreements be considered compatible with EU competition law. In these narrowly defined cases, such agreements may be permissible if they are directly linked to, and objectively necessary for, the implementation of a legitimate and competition-neutral main transaction. These are referred to as ancillary restraints and have the effect that the relevant agreement falls outside the scope of application of Article 101 (1) TFEU, meaning that an exemption is not required.
To qualify as an ancillary restraint, no-poach agreements must be directly related to, and objectively necessary for, the implementation of a lawful main transaction. Examples include:
- Joint ventures: Where two or more undertakings collaborate on a joint project, a no-poach agreement between the parties may, despite their horizontal relationship and under certain circumstances, be justified in favour of the participating companies to protect their mutual interests. Such an agreement may operate to the benefit of all participating undertakings, as it serves to protect the allocation of key personnel to the joint venture by mitigating the risk that one party will solicit or hire away highly qualified employees from another, thereby preserving the integrity of the cooperation and safeguarding the value of the parties’ shared investments.
- Vertical supply relationships: A no-poach clause may also be considered legitimate in the context of a supply agreement between a supplier and its customers, particularly where the supplier has incurred substantial costs in recruiting and training personnel to provide services to the customer, and the personnel are essential to the performance of the contractual obligations. In such cases, the restriction to the benefit of the supplier seeks to protect its investment, thereby preserving the intended allocation of responsibilities under the agreement.
- Corporate acquisitions: In the context of corporate acquisitions, a no-poach agreement imposed on the seller may be justified as equivalent to a non-compete obligation. Such a clause may be necessary to ensure that the buyer receives the full value of the acquired business, including its workforce and supply-source, by preventing the seller from hiring away the key employees post-transaction. While the clause restricts the seller’s ability to recruit former employees, it primarily serves to protect the buyer’s legitimate interests in maintaining the continuity, know-how and operational integrity of the transferred undertaking.
For such restrictions to fall within the scope of the ancillary restraint’s doctrine, three cumulative criteria must be met:
- Objective necessity: It must be demonstrable that the no-poach clause is indispensable for the main objective to proceed; that is, without such a restriction, the parties would not have entered into the relevant transaction at all.
- Proportionality: The scope of the restriction must be narrowly tailored and not be excessive in relation to its intended purpose. In particular, it should apply only to the employees concerned and be limited in duration and geographic scope.
- Lack of less restrictive alternatives: There must be no reasonable alternative means to achieve the same objective. Measures such as non-disclosure agreements, the repayment of training costs or non-compete clauses (where compatible with competition and labour laws) must be ruled out as inadequate substitutes.
Regardless of the circumstances, the Commission considers that no-poach agreements are primarily at the employees’ expense as they restrict their job mobility thereby causing harm, by weakening competition in the employment market. For this reason, the bar to meet the prerequisites outlined above is set rather high.
Comment and perspective
A jurisdictional view
In Germany, no-poach agreements have not yet been subject to antitrust scrutiny. Poaching activity has generally been defensible under the rules on unfair commercial practices pursuant to the Act Against Unfair Competition (Gesetz gegen den unlauteren Wettbewerb – UWG). For example, the Regional Court of Koblenz (LG Koblenz 11 O 12/24) held that the solicitation of employees by a competitor is generally in line with unfair competition law and does not amount to a targeted obstruction within the meaning of Section 4 No. 4 UWG. The court reasoned, among other things, that the freedom of competition also encompasses the freedom to recruit employees.
The German Federal Court of Justice (Bundesgerichtshof – BGH) has assessed non-compete covenants imposed on employees under Section 75f of the German Commercial Code (Handelsgesetzbuch – HGB). It found that employees must be able to choose their place of employment freely and without undue restriction (BGH I ZR 245/12). The court’s reasoning aligns with the Commission’s position that competition in labour markets deserves protection.
In Germany, no-poach agreements are increasingly coming into focus in academic literature and legal commentary, particularly regarding antitrust considerations.
In France, on 11 June 2025, the French Competition Authority (FCA) imposed fines totalling €29.5 million on four companies operating in the engineering, technology consulting and IT services sectors for engaging in anti-competitive no-poach agreements. This marks the FCA’s first substantive decision focusing exclusively on anti-poaching practices.
The FCA identified:
- General no-poach agreements, often referred to as “gentlemen’s agreements”, which are informal, unwritten and of indefinite duration. The FCA concluded that these represent restrictions of competition by object.
- Non-solicitation clauses inserted in partnership agreements, targeting specific categories of personnel or particular projects. The FCA dismissed concerns as these clauses were considered limited in scope and duration – targeting specific personnel or projects – and therefore not inherently anti-competitive. Nonetheless, the FCA emphasised that such clauses may still be considered anti-competitive in future cases, depending on the context and how they are implemented.
The FCA had already sanctioned a no-poach agreement as part of a broader agreement (Decision No. 24-D-06 of 21 May 2024) concerning practices in the prefabricated concrete products sector. In this case, the no-poach agreement was part of a series of anti-competitive agreements. The FCA found that the agreement led to two cartel members, in particular, jointly coordinating important aspects of their economic activity and thus engaging in anti-competitive behaviour.
In the UK, the Competition and Markets Authority (CMA) has made it clear that no-poach agreements are unlawful under UK competition law. This position was supported in a speech by the chief executive of the CMA in January 2024, which set out that the CMA would take enforcement action in relation to unlawful no-poach agreements. At the same time, the CMA published a report on competition and market power in UK labour markets. The report found that 2-3% of UK companies use no-poach agreements, categorising them as employment clauses limiting the mobility of workers.
Earlier this year, the CMA found that entities involved in sports production and broadcasting had breached competition law through their conduct in labour markets. This included agreements not to enter bidding wars, coordination on rates and presenting a united front in dealings with freelancers. As a result, three entertainment companies were cumulatively fined £4.2 million (while the leniency applicant was exempt from the penalty).
Focusing specifically on non-poach agreements, the CMA expanded its investigation into an alleged cartel in the fragrance industry to include unlawful no-poach agreements involving reciprocal arrangements relating to the hiring or recruitment of staff in this market. The outcome of this investigation is still pending. Further, the CMA has committed to publishing additional guidance for employers in 2025 on how to avoid anti-competitive behaviour in labour markets, so further developments on this topic are likely.
In the United States, the relevant laws applicable to no-poach agreements are the Sherman Act, which prohibits agreements that unreasonably restrain trade, and the Federal Trade Commission Act, which prohibits unfair methods of competition. The Department of Justice (DOJ) and the Federal Trade Commission (FTC, and collectively, the Agencies) enforce these federal antitrust laws. A distinction can therefore be made between the prosecution of no-poach agreements under civil and criminal law.
In January 2025, the Agencies revised their Antitrust Guidelines for Business Activities Affecting Workers (Antitrust Guidelines, available in English) and specifically discussed no-poach agreements. The Antitrust Guidelines note that the DOJ may criminally investigate and bring felony charges against individuals and companies that participate in no-poach agreements. However, the DOJ’s criminal prosecutions of no-poach agreements have been unsuccessful across the board, resulting in no criminal convictions.
The DOJ’s efforts to bring criminal charges for antitrust violations in the labour market may, however, be shifting. In April 2025, the DOJ obtained its first wage-fixing trial conviction. In that case, the DOJ alleged that Eduardo Lopez, a home health care staffing executive in Nevada, fixed the wages of home health nurses (see U.S. v. Lopez, No. 23-cr-00055 (D. Nev.)). After a two-week trial, the jury found Lopez guilty of entering into a conspiracy to fix wages. While the case specifically involved wage-fixing allegations, Lopez signals that the DOJ can be successful in labour market antitrust cases when the facts are strong enough. This underscores the application of antitrust laws to bilateral or multiparty coordinations within the labour market, including no-poach agreements.
An area that has broadly seen more success is private actions brought by employees against their employers and other companies that have entered into no-poach agreements. Many of these cases have resulted in large settlements, including a US$435 million settlement involving multiple technology and entertainment companies for alleged secret no-poach agreements between the companies (see In re High-Tech Employee Antitrust Litigation, No. 11-CV-02509 (N.D. Cal.)).
The landscape for both civil and criminal exposure related to labour market activity that violates U.S. antitrust laws is an ever-evolving space and shows no sign of quieting down.
What’s next and how Reed Smith can help
It can be expected that competition regulators around the world will pay closer attention to competition restrictions in the labour market, particularly where agreed among competitors, thereby upholding fair and competitive labour markets and protecting employees’ opportunities for professional development.
Reed Smith can advise on any such arrangements and assist companies in identifying solutions that align their business interests with competition law compliance.
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